House
Bill 253, pertaining to manufactured homes, has become law. It represents
a vast improvement over prior law. The North Carolina Land Title
Association (NCLTA) was very active in proposing legislation to clarify
this area of the law and in the passing of the bill.

In
our Summer 1998 (Issue #4) issue, we discussed the basics of, and problems
with, manufactured housing. That issue and our Fal11998 (Issue #5) issue
discusses one important aspect not remedied
by the bill: the need to ascertain whether manufactured housing is
prohibited or restricted by restrictive covenants. This article will
discuss the bill and its implications.

2.
G.S.105-273(13).

G.S.
105-273(13) is part of Chapter 105 pertaining to taxation, particularly ad
valorem taxation. House Bill 253 amends G.S. 105-273(13) effective for
taxes imposed for taxable years beginning on or after July 1, 2000.See Sec. 4 of H.B. 253.

G.S.
105-273(13), as amended, provides as follows:

When
used in this Subchapter (unless the context requires a different
meaning):...

(13)
'Real property,' 'real estate,' and 'land' mean not only the land itself,
but also buildings, structures, improvements, and permanent fixtures on
the land, and all rights and privileges belonging or in any way
appertaining to the property.These
terms also mean a manufactured home as defined in G.S. 143- 143.9(6) if it
is a residential structure; has the moving hitch, wheels, and axles
removed; and is placed upon a permanent foundation on land owned by the
owner of the manufactured home. A manufactured home as defined in G.S.
143-143.9(6) that does not meet all of these conditions is considered
tangible personal property.

G.S.
143-143.9(6) contains a very precise and detailed definition of
"manufactured home."

Note
that G.S. 105-273(13) requires the manufactured home to be a
"residential structure", Does
this mean a structure that is readily identifiable as a home used only for residential purposes? Or, does this mean a structure that
is readily identifiable as a home but that is actually used for
residential or other permitted purposes? Perhaps the first construction is
intended. However, if that is true, the question must be "why,"
since the purpose of G.S. 105-273(13) for taxes and for the statutes
discussed below is: when is a manufactured home so related to real
property or land so as to become part and parcel thereof?

3.
G.S.20-109.2.

G.S.
20-109.2 is news.It is
effective January
1, 2002 and the statute, as in the case of new G.S. 47-20.6 and new G.S.
47-20.7 discussed below, applies to manufactured home title cancellations,
declarations of intent, deeds, deeds of trust and other instruments recorded
after that date. Note that recordation and not execution is the key to
applicability.

G.S.
20-109.2(a), entitled "Surrender of Title," provides that:

If
a title has been issued for a manufactured home and the manufactured home
qualifies as real pr<perty as defined in G.S. 105-273(13), the owner
shall submit an affidavit to the Division that the manufactured home meets
this definition and surrender the certificate of title to the Division.

Note
the reference in G.S. 20-109.2(a) to G.S. 105-273(13) discussed in 2.
above. G.S. 105-273(13), as amended by House Bil1253, is not a new
statute; it is an amended statute. Note the discussion in 2. above as to when amended G.S. 105-273(13) becomes effective and
for what purposes. It would seem that the session laws should have
specified what was intended by G.S. 20-109.2(a)'s reference to (as well as
G.S. 47-20.7's reference to and G.S. 47-20.6's dependency upon) amended
G.S. 105-273(13). Section 4 of House Bill 253 should have also said that
amended G.S. 105-273(13), for purposes of G.S. 20-109.2, G.S. 47- 20.6 and
G.S. 47-20.7, is effective January 1, 2002. "The Division" is
the Division of Motor Vehicles.

It
is noted that G.S. 20-109.2(b) contains information required in the
affidavit in addition to the requirement in G.S. 20-109.2(a) that the
affidavit state that "the manufactured home meets [the definition in
G.S.105-273(13)]." Also, a review of G.S. 20-109.2(d), quoted and
discussed below, shows that an affidavit pursuant to G.S. 20-109.2(d) must
also contain the information required by G.S.

20-109.2(b).
Therefore, G.S. 20-109.2(a) would have been better had the phrase after
the comma read, "the owner shall submit an affidavit to the Division
that the manufactured home meets the definition in G.S.105-273(13) as to
the real property described in the affidavit and complies with the
additional content requirements of subsection (b), and surrender the
certificate of title to the Division."

G.S.
20-109.2(b), entitled “Affidavit," states that the affidavit must
be in a form approved by the Commissioner and shall include or provide for
all of the following information: (1) the manufacturer and, if applicable,
the model name of the manufactured home; (2) the vehicle identification
number and serial number of the manufactured home; (3) the legal
description of the real property on which the manufactured home is placed,
stating that the owner of the manufactured home also owns the real
property; (4) a description of any security interests in the manufactured
home; and (5) a section for the Division's notation or statement that the
title has been surrendered and cancelled by the Division.

G.S.
20-109.2(b) would have been better had it contained (6), stating: “Any
additional information required by subsection (a), subsection (c) or
subsection (d)."

The
first two sentences of G.S. 20-109.2(c), entitled
"Cancellation," state that:

Upon
compliance by the owner with the procedure for surrender of title, the
Division shall rescind and cancel the certificate of title. If a security
interest has been recorded on the certificate of title, the Division may
not cancel the title without written consent from all secured parties.

The
proposed form of affidavit (required by G.S. 20-109.2(a) and outlined in
G.S. 20-109.2(b))
has a place for the written consent of secured parties. Apparently,
written consent of a secured party will extinguish that party's lien on
the title.

The
third sentence of G.S. 20-109.2(c) provides that:

After
cancelling the title, the Division shall return the original of the
affidavit to the owner, or to the
secured party having the first recorded security interest, with the
Division's notation or statement that the title has been surrendered and
has been cancelled by the Division. (Emphasis added.)

In
that third sentence, does the italicized phrase mean that if there is at
least one secured party that the original affidavit must
be returned to the holder of the first recorded security interest and
not the owner or does the phrase mean that the original affidavit can be
returned to either the owner or the holder of the first recorded security
interest? Perhaps the following indicates that the answer is
"either."

The
last sentence of G.S. 20-109.2(c) states that:

The
owner or secured party shall
file the affidavit returned by the Division with the office of the
register of deeds of the county where the real property is located.
(Emphasis added.)

This
last sentence sets out a rule that is repeated in the first sentence of
new G.S. 47-20.6(a) set out below, except that the last sentence of G.S.
20-109.2(c) uses the phrase "file the affidavit" and G.S.
47-20.6(a) uses the phrase "record the affidavit." This is not
deemed significant. However, cleaner drafting would have avoided
duplication and phrased the last sentence of G.S. 20-109.2(c) as follows:
"G.S. 47-20.6(a) shall be complied with."

G.S.
20-109.2(d) is entitled, “Application for Title After
Cancellation." The first sentence provides:

If
the owner of a manufactured home whose certificate of title has been
cancelled under this section subsequently seeks to separate the
manufactured home from the real property, the owner may apply for a new
certificate of title.

The
way the first sentence is structured, it, and the rest of G.S.
20-109.2(d), is subject to the literal interpretation that the owner who
surrendered and had cancelled the certificate of title is the only owner
who can apply for a new title under G.S. 20-109.2(d). However, if the
manufactured home has been cancelled by A,
the owner on the title and the owner of the real property, under G.S.
20-109.2, and the affidavit is recorded under G.S. 20-109.2(c) and G.S.
47-20.6(a) (discussed below), and the manufactured home and the real
property become one tract of real property under G.S. 47-20.6(b)
(discussed below), and A conveys
such real property to B and B
records, B should be able to utilize a statute such as G.S. 20-109.2(d) - if
the other conditions to its use exist-even though B is not the "owner...whose certificate of title has been
cancelled..." The first sentence of G.S. 20-109.2(d) should be
clarified to clearly permit this.

The
rest of G.S. 20-109.2(d) states:

The
owner must submit to the Division an affidavit containing the same
information set out in subsection (b) of this section, verification that
the manufactured home has been removed from the real property, and written
consent of any affected owners of recorded mortgages, deeds of trust, or
security interests in the real property where the manufactured home
was placed. The Commissioner may require evidence sufficient to
demonstrate

that
all affected owners of security interests have been notified and consent.
Upon receipt of this information, together with a title application and
required fee, the Division is authorized to issue a new title for the
manufactured home. (Emphasis added.)

G.S.
20-109.2(d) refers to submitting an affidavit containing the same
information in G.S. 20-109.2(b) and verification that the manufactured
home has been removed from the real property. Presumably, the affidavit
could contain the owner's statement of removal. However, it is not clear how
removal is to be verified under G.S. 20-109.2(d). Can the owner's
statement alone constitute the verification? Or, must there be a
verification by an independent party? If so, who can that party be? Any
knowledgeable adult, it would seem. The way the second sentence of G.S.
20- 109.2(d) is written, must the affidavit also contain the verification
and the below mentioned consent of interest holders or may the
verification and consents be in form(s) separate from the affidavit? It is
believed that the affidavit, verification and consents can be contained in
the affidavit (if possible at the time the affidavit is given) or can be
in separate documents.

Note
G.S. 20-109.2(d)'s reference to consent of "any affected owners of
recorded mortgages, deeds of trust, or security interests in the real
property" "Security interest" is a term defined in G.S.
25-1-201(37) of the U.C.C. to mean "an interest in personal property
or fixtures" securing an obligation. However, the definitions section
of the U.C.C. (G.S. 25-1-201) makes it clear that the definitions are for
terms used "in this Chapter"; that is, Chapter 25. Therefore,
while the term "security interests" should have been defined in
G.S. 20-109.2 to include "liens" or the word "liens"
should have been added to G.S. 20-109.2(d), we are informed that
"security interests" was

intended
to include judgment liens and other liens. This is not an unreasonable
interpretation. Note, however, that G.S. 20- 109.2(d) does not require the
written consent of, for example, a lessee with a valid unrecorded or
recorded lease of the land and improvements thereon. (See G.S. 47-18 for
when a lease must be recorded.) A lease is not usually considered a
security interest. It would seem that if a valid lease existed on or
before January 1, 2002, consent of the lessee would have to be obtained
for a G.S. 20-109.2(d) procedure notwithstanding G.S. 20-109.2(d). See
Sec. 4 of House Bil1253 regarding applicability of the act: As to leases
becoming effective for priority purposes after January 1, 2002, the
argument could be made that the lease is subject to the rule in G.S.
20-109.2(d) and that statute would not require the consent of the ten
ant.

Itis noted that when written consent is given pursuant to G.S. 20-
109.2(d), the clear implication is that the lienor giving consent is
giving up his lien (which encumbers the land and all improvements thereon,
including the manufactured home) on the manufactured home.

As
noted above, G.S. 20-109.2(d) refers to "recorded mortgages, deeds of
trust, or security interests." Under the analysis above, that would
certainly cover a claim of lien for labor, services, materials or
equipment docketed pursuant to G.S. 44A-12. The quoted language seems to
require the consent of a party holding a recorded (or docketed) lien only.
It would therefore appear that a lien for labor, services, materials or
equipment for which a claim of lien could be filed but was not filed at the time of removal and application pursuant to
G.S.20-109.2(d) would not be a lien for which consent is required. Such a
lien, once eventually docketed against the land and the improvements
thereon, would be lost to the extent of the manufactured home. This result
would be based
upon not only the language of G.S. 20-109.2(d) but also the fact that G.S.
20-109.2(d), being a specific statute as to the manufactured home,
"trumps" Chapter 44A, including G.S. 44A-7(2) (definition of
"improvement"), G.S. 44A-7(4) (definition of "real
property"), G.S. 44A-8 (grant of lien), G.S. 44A-9 (extent of lien),
G.S. 44A-10 (effective date of lien) and G.S. 44A-14(a) (priority of
lien).

4.
G.S. 47-20.6.

G.S.
47-20.6 is entitled, Affidavit for permanent attachment of titled
manufactured home to real property:" Itbecomes effective January 1, 2002.

The
first sentence of G.S. 47-20.6(a) provides that:

If
the owner of real property has surrendered the title to a manufactured
home that is placed on the real property and the title has been cancelled
by the Division of Motor Vehicles under G.S. 20-109.2, the owner, or the
secured party having the first security interest in the manufactured home
at time of surrender, shall record the affidavit described in G.S.
20-109.2 with the office of the register of deeds of the county where the
real property is located.

This
dovetails with the last sentence of G.S. 20-109.2(c).

The
second sentence of G.S. 47-20.6(a) states as follows:

Upon
recordation, the affidavit shall be indexed on the grantor index In the
name of the owner of the manufactured home and on the grantee index in the
name of the secured party or lien- holder, if any.

Note
how this sentence uses the terms "secured party" and "lien-
holder." As pointed
out, G.S. 20-109.2 does not use the term "lienholder."

This
is probably an oversight. Presumably, "secured party or lienholder"
was intended to mean, "secured party of record or lienholder of
record."

G.S.
47-20.6(b) provides that:

After
the affidavit is recorded, the manufactured home becomes an improvement to
real property. Any lien on the manufactured home shall be perfected and
given priority in the manner provided for a lien on real property.

In
the first sentence of G.S. 47-20.6(b), while use of the term
"improvement" is satisfactory, the statute would have been
better had it said, "improvement to and part of the real
property."

We
are told that the second sentence of G.S. 47-20.6(b) is intended to mean,
“Any lien on the real property and the manufactured home located thereon
arising and having an effective date of priority after the affidavit is
recorded pursuant to G.S. 47-20.6(a) shall be perfected and given priority
in the manner provided for a lien on real property."

G.S.
47-20.6(c) states as follows:

Following
recordation of the affidavit, all existing liens on the real property are
considered to include the manufactured home. Thereafter, no conveyance of
any interest, lien, or encumbrance shall attach to the manufactured home,
unless the interest, lien, or encumbrance is applicable to the real
property on which the home is located and is recorded in the office of the
register of deeds of the county where the real property is located in
accordance with the applicable sections of this Chapter.

The
first sentence of G.S. 47-20.6(c) is a nice touch. The existing lien will,
in essence, attach to after acquired real property in the form of the
manufactured home. Of course, since the statute uses the phrase
"existing liens," one can assume that this would include not
only a docketed claim of lien against the land at the time the affidavit
is recorded, but also a lien that is unfiled at the time the affidavit is
recorded and is thereafter perfected by docketing a claim of lien pursuant
to G.S. 44A-12. That is because of the broad language of the first
sentence of G.S. 47-20.6(c).

The
second sentence of G.S. 47-20.6(c) is fine except that it should be noted
that a judgment or claim of lien is docketed with the clerk of superior
court. But since the second sentence seems to state the obvious result
even absent the second sentence, no real substantive harm has occurred.
Also, the second sentence is somewhat redundant in view of the last
sentence of G.S. 47-20.6(b), although the last sentence of G.S. 47-
20.6(b) does not refer to conveyances.

G.S.
47-20.6(d) and G.S. 47-20.7(d) state as follows:

The
provisions of this section control over the provisions of G.S. 25-9-334
relating to the priority of a security interest in fixtures, as applied to
manufactured homes.

5.
G.S.47-20.7.

G.S.
47-20.7 is entitled, "Declaration of intent to affix manufactured
home; transfer of real property with manufactured home attached."

G.S.
47-20.7(a) is set forth as follows:

A
person who owns real property on which a manufactured home has been, or will be placed, as defined in G.S. 105- 273(13), and either where
the manufactured home has never been titled by the Division of Motor Vehicles
or where the title to the manufactured home has been surrendered and
cancelled by the Division, may record
in the office of the register of deeds of the county where the real
property is located a declaration of intent to affix the manufactured home
to the property and may conveyor encumber the real property, including the
manufactured home, by a deed, deed of trust, or other instrument recorded
in the office of the register of deeds. (Emphasis added.)

G.S.
47-20.7(a) literally also applies to a situation where a manufactured home
"has been...placed" on the real property, as in the situation
described in G.S. 47-20.6. That includes "where the title...has been
surrendered and cancelled..." Such a circumstance need not have been
included in G.S. 47-20.7(a), unless the intent was to cover a situation
where the title was surrendered and cancelled by the Division, but the
affidavit required by G.S. 20-109.2(c) and G.S. 47-20.6(a) to be recorded
in the register of deeds office has not been recorded by the owner
surrendering title pursuant to G.S. 20-109.2 or the holder of the first
recorded security interest. That appears to be the intent. In such a case,
the owner surrendering the title or a subsequent owner can utilize the
statute. The statute can be used were the manufactured home has been
placed on the real property but has never been titled. The statute is
available even in a situation where the manufactured home "will be
placed" on the real property, unlike G.S. 47-20.6 where the
manufactured home has been placed on the real property. And that is true
if the home has never been titled or the title has been surrendered and
cancelled by the Division. So, G.S. 47-20.7 is intended to govern
situations where G.S. 47-20.6 has not been used and cannot easily be used.

The
document referred to in G.S. 47-20.7(a) is a declaration of intent to
affix. Depending
upon the facts, this will be recorded after the home is affixed or prior
to affixation. When the declaration is recorded prior to affixation, it is
unclear, by reading G.S. 47-20.7(a), whether, for example, a deed to the
real property recorded before affixation will be deemed to also convey the
subsequently affixed home. G.S. 47-20.7(a), when it says, "may
conveyor encumber the real property, including the manufactured
home," is inconclusive since the statute does not say when the
manufactured home is deemed conveyed. G.S. 47-20.7(c), discussed below; is
not conclusive, since it, too, refers to a manufactured home "to be
placed" upon the real property. Perhaps the following is the correct
analysis. If, for example, A conveys
real property to B after the
declaration is recorded and before the manufactured home is affixed, B
will get title to the home under general principles of law, regardless
of what G.S. 47-20.7(a), in its present form, says. Or, G.S. 47-20.7(a) is
just stating the obvious regardless of when affixation occurs. G.S.
47-20.7(c) could be cited as supportive of this position.

G.S.
47-20.7(b) states that:

The
declaration of intent, deed, deed of trust, or other instrument shall
contain a description of the manufactured home, including the name of the
manufacturer, the model name, if applicable, the serial number, and a
statement of the owner's intention that the manufactured home be treated
as real property.

Particularly
with respect to the declaration of intent, the following should have been
substituted for the last four words of G.S. 47-20(b): "treated as
part of the real property described in the description."Note that while the serial number is required by G.S.
47-20.7(b), the "VIN"

number
is not, in contrast to G.S. 20-109.2(b)(2). G.S.
47-20.7(c) provides as follows:

On
or after the filling of the instrument with the office of the register of
deeds pursuant to subsection (a) of this section, the manufactured home
placed, or to be placed, on the property becomes an improvement to real
property. Any lien on the manufactured home shall be perfected and have
priority in the manner provided for a lien on real property.

The
last sentence of G.S. 47-20.7(c) should be construed as is the last
sentence of G.S. 47-20.6(b).

6.
Summary.

The
NCLTA is working with the Division to come up with (1) a form that will
satisfy the requirements of G.S. 20-109.2(a) and (b), G.S. 20-109.2(d) and
G.S. 47-20.6 and (2) a form of declaration to be used under G.S.47-20.7.
There is some concern that, since the statutes do not exempt the forms
from Chapter 47 acknowledgment requirement, the forms contain proper
acknowledgment provisions. Form MVR-46G, an “Affidavit For Removal of
Manufactured Home From Vehicle Registration Files," in accord with
G.S. 20-109.2, is finalized. We have a copy.

The
bill should eliminate many of the problems with manufactured home titles.
The bill is a very good achievement on the part of the NCLTA and others
and should be improved upon as analysis and experience requires.